1999 Ruling 9919083 - RETIRING ALLOWANCE - YEARS OF NO INCOME

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Retiring Allowance Paid by Farmer to Spouse - worked 34 years in farm, but T4'd for only 3

Position: Yes

Reasons: The payment is in compliance with the Act, and the file is similar to prior rulings given in such circumstances.

XXXXXXXXXX 991908

Attention: XXXXXXXXXX

XXXXXXXXXX 1999

Dear XXXXXXXXXX:

Re: XXXXXXXXXX - Retiring Allowance Paid to Spouse

This is in reply to your letter of XXXXXXXXXX wherein you request an advance income tax ruling on behalf of the above taxpayer.

DEFINITIONS AND ABBREVIATIONS

In this letter, the following terms have the meanings specified:

(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof;

(b) "Registered retirement savings plan" ("RRSP") has the meaning assigned by subsection 146(1) of the Act;

(c) "Retiring allowance" has the meaning assigned by subsection 248(1) of the Act;

(d) "Employer" means:

XXXXXXXXXX.

(e) "Employee" means:

XXXXXXXXXX.

FACTS

1. The Employee was born on XXXXXXXXXX and was married to the Employer on XXXXXXXXXX.

2. The Employee has been employed by the Employer in the operation of a farm since XXXXXXXXXX. The Employer has been a full-time farmer since XXXXXXXXXX. The Employee has not been employed by any other farm or business since that time.

3. The Employee did not receive any salary prior to XXXXXXXXXX as a result of her employment. For the past three years the Employee's salary has been as follows:

XXXXXXXXXX.

4. The Employer has never contributed to a deferred profit sharing plan or pension plan other than the Canada Pension Plan on behalf of the Employee, and the Employee has no entitlements under any such plan.

5. The Employee received her direction in the performance of her duties from the Employer. Her duties included:

• operation of farm equipment, including tractors, grain trucks, augers, cultivators, balers, etc;
• feeding of livestock, including cattle, pigs and chickens;
• assistance with repairs and maintenance of equipment;
• assisted in cleaning grain, loading trucks, cleaning grain bins, etc.

6. The Employer intends to dispose of the farm in XXXXXXXXXX to his son and substantially retire from farming. Once the farming operation is sold, the Employee will no longer be employed by the Employer or his son.

PROPOSED TRANSACTION

7. The Employer proposes to pay the Employee a retiring allowance of $XXXXXXXXXX.

8. The Employee proposes to have the full amount of the retiring allowance contributed to an RRSP under which the Employee is the annuitant. It is expected this will be done through a direct transfer by the Employer.

PURPOSE OF THE PROPOSED TRANSACTION

9. The Employer wishes to pay the Employee a retiring allowance in recognition of her long and loyal service in the farm business and in respect of her loss of employment.

ADDITIONAL INFORMATION

10. To the best of your knowledge and that of the Employer and Employee, the issues related to this request:

a) have not previously been reported in the Employer's, Employee's or any related party's prior income tax returns;

b) are not being considered by a tax services office in connection with any of the Employee's or a related party's prior income tax return;

c) are not under objection by the Employee or a related person;

d) are not before the courts; and

e) are not the subject of a ruling previously issued by this Directorate.

RULINGS GIVEN

Provided the above statement of facts and proposed transactions are accurate and constitute a complete disclosure of all relevant facts and provided the transactions are completed as proposed, we rule as follows:

A. The proposed payment of $XXXXXXXXXX will qualify as a retiring allowance and will be included in the Employee's income under subparagraph 56(1)(a)(ii) of the Act in the year in which it is paid;

B. The proposed payment of $XXXXXXXXXX to the Employee's RRSP will be deductible by the Employee pursuant to paragraph 60(j.1) of the Act to the extent permitted therein;

C. The amount of $XXXXXXXXXX will be deductible by the Employer in computing income from the business of farming for the year in which it is paid and will be considered reasonable for the purposes of section 67 of the Act.

These rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 dated December 30, 1996 issued by Revenue Canada Taxation, and are binding provided the proposed transactions are completed on or before XXXXXXXXXX.

Yours truly,

Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate